by Al MartinSurprise! Surprise! What Are the Global Implications of the Brexit Vote?
(7-3-16) As Gomer Pyle used to say on that old TV show – Surprise! Surprise!
The Eurocrats i.e. EU Bureaucratic Politburo & Nomenklatura, is in a tizzy. Is Brexit the beginning of a Pan-European contagion? And what’s the future for the failed EU (European Union) and the failed EMU (Economic and Monetary Union)?
First the UK and then France (National Front), Italy (Five Star Movement), Denmark (Danish People’s Party), and the Netherlands (Freedom Party) have all called for a leave-EU referendum of their own.
There are five more countries that want to hold referendums to exit the EU – France, the Netherlands, Italy, Austria, Finland and Hungary.
Politically the next move is that other countries are also considering their own exit from the EU. France leaving the EU is being called Frexit and the Netherlands exit is being called Nexit.
The implication for the Euro was seen Friday (June 24) when the Euro moved lower. It didn’t have a big fall, but it did move lower and now you see the Big Shorts coming into the Euros who are probably prepared to hold them for a matter of months.
The Euro is under pressure anyway as president of the European Central Bank (ECB) Mario Draghi has been the most vocal about lowering rates. The Euro has been under natural economic pressure but it has nothing to do with the politics.
When a central bank lowers rates, the value of the currency continues to fall and the ECB has been the most aggressive in reducing rates.
It should be noted that the EU was never one big happy family unless you were one of the peripheral states like Spain and Portugal which were getting bailed out.
Things in Europe are changing. You’ve seen all of the right-wing parties in Europe rising in the polls. Their vote totals are increasing. I think it’s likely that the European Union will break apart because Germany is the only power that is really attempting to hold it together -- and in the last analysis Germany will not be able to hold the European Union together.
Of course Germany has the biggest economic interest in maintaining the Euro as currency but Netherlands and Austria could hold a plebiscite tomorrow on the question of remaining in the EU or not.
However this won’t lead to the breakup of Spain as the separatist movement in Catalonia will have as much effect as the purported breakaway of Scotland which didn’t occur. Why? Because nobody has a vested interest in seeing that happen.
The underlying flaws of the European Union, when it was first put together in 1987, was its failure to achieve a political union -- and that is now coming home to roost, as they say. This failure underlines the fact that it’s difficult to have a financial union without a political union.
Germany and France are the largest and wealthiest members of the EU and both have a vested interest in seeing the European Union disintegrate. What both are going to do is go back to the Deutschmark and the French franc and then cheapen their currencies. This is a real possibility, but the problem that got overlooked in all of this with the European Union is that it took away the individual country’s ability to cheapen their currency for trade purposes in order to provide stimulus to their own economy.
When you go to a single currency like the Euro, the independent members of the EU were not able to play games with their own currency, i.e. to cheapen their currency in order to promote exports. You can’t do that with a single currency.
The Eurocrats (EU Bureaucrats) were trying to build some kind of naïve socialist welfare vision of a federalized Europe.
There have been comparisons made between Hitler’s vision for a European “union” and the European Union itself. These were “unions” that were made by force. Hitler wanted to build a German-controlled Greater Europe. Currently the comparison is that Germany is the greatest economic power within the European Union. So what’s the difference between the “unions”? Hitler’s was a military “union” while the EU is a political and economic “union.”
What’s expected to happen – and what will happen – is that eventually EU members have to have the ability to get back control of their own monetary policy. That’s why the EU can’t remain together – and they never really could.
You heard this in the Brexit vote when even the Nigels -- the Brit equivalent of Joe Sixpacks -- who don’t understand anything about economics do understand the question of sovereignty and that’s what sold the Brexit vote. The Nigels have not benefited from the “recovery” from the 2007 recession and they are very susceptible to the argument of sovereignty.
It can be argued that the 18% have gamed the system to the detriment of the 82%. However if you go to Yale and Harvard, you get the credentials you need to get into the “game” or into the “system.” The college diploma or MBA allows you to get a job at an investment bank or a brokerage house – but you don’t get into the system until what happens afterwards.
After the Brexit vote, more countries will have some type of “exit” vote. If Netherlands, votes to withdraw, since it’s one of the core states within the European Union, that would probably begin the unraveling…

* AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.

After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.

His memoir, "The Conspirators: Secrets of an Iran Contra Insider," (http://www.almartinraw.com) provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin Raw.com, which also publishes a bimonthly newsletter called "Whistleblower Gazette."

Al Martin's new website "Insider Intelligence" (http://www.insiderintelligence.com) will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.